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Past Due: The Impact of External Debt in Explaining Equitable Development

Benjamin Carbonetti and Salil Benegal

Working paper presented at the 2012 Annual Meeeting of the International Studies Association. 

Current explanations of a country's ability to develop equitably and sustainably revolve around economic and political factors like resources, geography, regime type, and other material and institutional characteristics. One factor which has garnered a large amount of attention lately in the development literature is the amount and type of external debt a country has. The debate over whether external debt plays a key role in hampering development is by no means settled.  Utilizing the new Social and Economic Rights Fulfilment (SERF) Index, we test the impact of external debt, amongst other notable variables found in the development literature, on a country’s ability to use its resources effectively fulfil economic rights and thus not only to develop, but develop more equitably. The SERF index measures the distance between the expected capability of a country to fulfil rights and actual fulfilment of rights. We expect that although countries may experience economic growth despite debt overhangs, the development of human and social capital is constrained when new economic gains are used to service existing long-term debt rather than providing essential social goods or services.

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